Morning Market Overview

In the pre-inventory report release cycle oil prices were slightly higher after a bearish Short-Term Energy Outlook report issued by the EIA Tuesday.

The report showed a surge higher in US crude oil production compared to their February report. US crude oil production continues to make new record highs monthly. Also, as forecast by the IEA in their annual report earlier this week the US will become the largest global oil producer over the next few years.

With US crude oil production growing strongly OPEC and their non-OPEC partners to the production cutting accord are going to have to restrain production for an extended period if they expect prices to remain at current or even move to higher levels. Global balances will be negatively impacted by the growth in US crude oil production but should be positively impacted by the lack of upstream capital investment globally along with OPEC’s restrained production levels and global demand growth.

During the afternoon the API started the weekly inventory report cycle with a mixed inventory snapshot. Crude oil, and distillate fuel stocks built more than the expectations while gasoline declined more than expected. The total combined inventories of crude oil and products were modestly higher on the week.

Overall the market turned mostly negative after the report was issued.